The US flew two unharmed and old B52 over the disputed Chinese/Japanese islands as a sign that the Asian Pivot Strategy it is here to stay.

The Chinese did not react, but it is a clear sign of open escalation.

The more worrying signs are others….much less evident.

The US is starting to redeploy its military bases to unused old “WW2” including India in order to be able to be less prone to a Pearl Harbor style attack initiated via Chinese missile attack.

This issue will make it easier for Japanese PM Abe to push for a full re militarization of the Japanese forces.

Again we are very far from a war, but accident can happen:

– Drones are very easy to fly to the target and so to get shot down

-Both Chinese and Japanese air forces have very limited combat experience (vs the US) and someone can get trigger happy or simply have an accident (in 2001 a Chinese jet fighter collided and crashed while trying to intercept a US surveillance aircraft)

Iran currently exports 750,000 barrel of oil per day, while its non- sanction capacity is 2,500,000 barrel of oil per day – practically the difference is a full 10% of the US oil consumption!

The Oil (WTI) now still trades within its “band” around USD 94, but specially after Christmas there will be a slow descent which will increase under USD92.

Now Iran will be allowed to export 1,000,000, not the full $2,500,000. The oil will probably slowly descend towards is no risk price of $75/80. When and if Iran will be allowed its full capacity (probably 2015 if nothing goes wrong) we could even see oil around USD 65.

This is practically a boost of 10% in every company and even in your wallet when you go and refuel your vehicle.

China unilaterally declared an extension to the “East China Sea Air Defense Identification Zone” that includes the disputed island. This is another blow in the spat between the two countries.

Japan, apart protesting, announced the doubling of the fleet of on-air refueling airplanes and plan to introduce new faster and more agile patrol boat.

The war scenario China-Japan is extremely unlikely also due to the strict economic links between the two giants. But a misunderstanding (let’s say a downing of a drone) can happen with clear repercussions.

The US, once again, just criticized the new escalation….but it could be that also the new US Asia Pivot could be called to see if it is a bluff (like the Syrian ultimatum) or not. The US should do better its homework to be prepared as Russia will be already preparing another KGB style masterstroke like Syria.

The US Senate Democrat changed a rule that requested to have 60 Senators to end a roadblock to a US Presidential nomination..

Practically if President Obama wanted to elect a judicial or executive representative (except US Supreme Court), unless he had 60 Senators, the nomination could be blocked by a small minority (read Tea Party). It has been a symbol of the US Congress gridlock and survived dozens of attacks, but not today.

This is just a small insight on what is happening in the Congress in trying to decrease the gridlocks caused by the Tea Party and in preparation for the new showdown in January.

If this pattern continuous and its ramifications get pick up by investors we could see an early start of the Stock Christmas rally.